McNabb says more than half of participants in 401(k)
retirement plans at Vanguard invest in a target-date fund (TDF), and 86% of
401(k) and other defined contribution plans administered by Vanguard offer a TDF option.
The firm hopes the products will help defined contribution plan investors
improve portfolio diversification.

Vanguard also announced plans to increase the international exposure
in some of its asset-allocation solutions. The international equity allocation
of Vanguard’s current lineup of Target Retirement Funds and LifeStrategy Funds will
increase to 40% from 30%, and the international fixed-income allocation will
increase to 30% from 20%.

“International holdings are a valuable diversifier in a
balanced portfolio, giving shareholders exposure to return streams that don’t
move in lockstep with the U.S. markets,” adds Tim Buckley, Vanguard chief investment
officer. He says Vanguard research demonstrates that non-U.S. equities can
enhance the returns of U.S. equities on average over time, while the
primary factors driving international bond prices are relatively uncorrelated
to the same factors for U.S. bonds, also providing a diversification
benefit.

The overall strategic asset allocation and glide path of the
current lineup of Target Retirement Funds will not change, Vanguard says. The expense
ratios of the Target Retirement Funds, ranging from 0.16% to 0.18%, are not
expected to change with the added international exposure. Investment allocation
changes are expected to be complete by year-end.